Glomac - Promising Prospect On Dengkil Land (OSK)

Dengkil land the key re-rating catalyst. Development potential of Glomac’s 192 acres of land at Dengkil has caught our eye during our latest round of company visits. In the recent years, township developments have gradually shifted outward from the KL city centre due to land scarcity. Glomac acquired this Dengkil land in Jun 2012 at a land cost of MYR8 psf (MYR67m), and we understand that this parcel of land is located opposite IOI’s newly-acquired 330-acre land in Kota Warisan. Glomac’s land is not far from the Salak Tinggi ERL station. More than 10k employees and workers at LCCT and KLIA will be the key driver for property demand. Residents who work in KL may opt to travel via the ERL, and it will only take about 30min to hit to KL Sentral (a one-way ticket costs MYR12.50). Meanwhile, it was reported that Xiamen University is going to set up its first overseas branch campus on a 150-acre site at Salak Tinggi, with a student capacity of 10k. Near to the airport, there are also plans to build a Premium Outlet.

¨      GDV revised to MYR1.2bn. Including some other smaller land parcels that Glomac has accumulated, the Dengkil land size has now risen to 231 acres. Linked houses there are currently commanding a market price of about MYR500k per unit. GDV for the land has, therefore, been revised up to MYR1.2bn. We will not discount the possibility of a further upward revision in the GDV in future when other surrounding developments are taking shape.

¨      Forecasts. No change in our earnings forecasts. The Dengkil township is slated for launch in 1H2014. Earnings contribution from township projects is expected to grow stronger going forward, when some of Glomac’s high-rise projects are completed.

¨      Upgrade to Buy. Given the encouraging prospects, we revise some of our RNAV assumptions. Our fair value is raised to MYR1.55, at a lower 20% discount to RNAV (from 25%). We upgrade the stock to Buy.